Shares of cloud-based cybersecurity company Zscaler, Inc. (NASDAQ:ZS) offer strong upside potential, according to a Wells Fargo Securities analyst.
The Zscaler Analyst: Andrew Nowinski initiated coverage of Zscaler shares with an Overweight rating and $400 price target, suggesting about 53% upside from current levels.
The Zscaler Takeaways: The volume and sophistication of cyber attacks are increasing at an alarming rate, necessitating deployment of a "Zero Trust" architecture, Nowinski said in the initiation note.
"We believe Zscaler offers the most sophisticated Zero Trust architecture and provides better protection (and performance) than all other vendors," the analyst said.
It significantly reduces the attack surface area and completely eliminates the risk of later movement, while also processing more than 200 billion transactions per day, he said.
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Zscaler's two flagship solutions, namely ZIA and ZPA, have the potential to increase annual recurring revenue from existing customers by five times, Nowinski said. Additionally, the company's new ZDX and ZCP products will likely expand its serviceable market by more than 50%, he said.
Zscaler, Nowinski said, is well-positioned to capitalize on spending within the U.S. federal market.
"While valuation appears expensive relative to peers, we believe Zscaler's competitive advantages are sustainable, which should enable growth to remain well above peers' for the foreseeable future," the analyst said.
ZS Price Action: Zscaler shares were trading 1.07% higher at $265.15 midday Thursday.
Related Link: Zscaler Gets Street-High Price Target: 'Still Early Days In Cloud Security Vendor's Growth'
